eg Chinese Voices
No. 46 | 29.05.2022
Shanghai is gradually reopening. A bus conductor shows a QR code for a passenger to scan before getting on a bus. May 24, 2022. [China Daily]
How can China achieve its growth target in the face of COVID-19?
Justin Lin Yifu
Justin Lin Yifu (林毅夫) is Dean of the Institute of New Structural Economics at Peking University, and is the former Chief Economist of the World Bank
Sheng Songcheng
Sheng Songcheng (盛松成) is a former head of the Financial Survey and Statistics Department at the People’s Bank of China

Context

China's economy faces increased downward pressure due to unexpected negative shocks including a new round of COVID-19 outbreaks and the Russian-Ukrainian conflict. Sheng Songcheng predicts that China's economy will turn significantly better in the second half of the year. Lin Yifu believes that if China can achieve "dynamic zero infection" (动态清零 dòngtài qīng líng) by the end of May, it is possible to accomplish the growth target of around 5.5 percent this year. The dynamic zero infection policy is China's approach to fighting against COVID-19 and signifies that all positive cases have been detected and are either sent to centralized treatment or to quarantine so as to break the transmission of COVID-19.

Key Points

  • By creating an Asian version of NATO and holding an ASEAN summit, the US is attempting to persuade other countries to decouple from China, thus disrupting the pace of China's national rejuvenation. There is no need to be alarmed, however. As the world's largest trading country, China is a fair and profitable trading partner, thus benefiting smaller economies and developing countries.
  • Since 2008, China's contribution to world economic growth has been between 25 and 30 percent. As long as China continues to grow at a higher rate and to open up, European and ASEAN countries would not participate in the US's decoupling trap so as to ensure their economic growth and job creation.
  • Domestically, the main problem with China's economy is that business confidence has weakened. Since last year, there have been some unintended negative effects caused by the implementation of certain medium- and long-term policies that are beneficial to high-quality economic development, such as regulating online platforms, strengthening dual controls over energy intensity and gross energy consumption and tightening financing rulesfor the debt-laden real estate sector. The Chinese Central Economic Conference has repeatedly emphasized that development is the basis for solving all problems, and the government should maintain rapid economic growth and rebuild confidence in a timely manner.
  • After achieving zero COVID-19 infections, China should quickly resume production and return to normal. Some SMEs and micro-enterprises in locked-down cities are on the verge of bankruptcy, and the government should help them stay afloat by introducing measures such as tax cuts, tax exemptions, and rent reductions. Lin's team also suggests a consumption voucher scheme including 500 yuan vouchers and 500 digital yuan to low- and middle-income families in the locked-down areas to support their consumption.
  • Sheng points out that real estate regulation can be moderately relaxed while adhering to the principles of risk prevention and non-speculative housing purchases.

Summary

Sheng points out that the economic impact of the epidemic will be mainly reflected in the second quarter, as GDP growth is expected to be around 2.1 percent but reach 3.5 percent at the end of the first half of the year. With the implementation of various policies to stabilize growth, China's economy will significantly improve in the second half of the year. According to Lin, China must not fall behind the US economic growth. As long as all the economic tools are properly used to overcome the difficulties it faces, China can still achieve an annual 6 percent growth rate in the next 14 years.

The US Indo-Pacific strategy is pulling ASEAN into its game against China
Liu Zongyi
Liu Zongyi(刘宗义)is Secretary General of the Center for China and South Asia Studies, Shanghai Institute of International Studies
Huang He
Huang He(黄河)is a professor at the School of International Relations and Public Affairs, Fudan University
Zhang Yuting
Zhang Yuting(张宇婷)is a graduate student at the School of International Relations and Public Affairs, Fudan University

Context

A few days after the ASEAN Summit, President Joe Biden visited South Korea and Japan and announced the launch of the "Indo-Pacific Economic Framework" (IEPF). Liu Zongyi points out that this framework aims to be the economic pillar of the US's "Indo-Pacific Strategy" that serves its geopolitical interests. Huang He and Zhang Yuting explain that the US ostensibly respects "ASEAN centrality", but actually uses the "Indo-Pacific Strategy" to weaken the internal cohesion and regional autonomy of ASEAN.

Key Points

  • IEPF was established to isolate China and re-establish the US as a central player in global supply chains, bringing other countries in the Asia-Pacific region under the US's sphere of influence.
  • Unlike the Trans-Pacific Partnership (TPP), IEPF will not facilitate access, for other countries, to the US market by eliminating tariffs and non-tariff barriers to trade. It is clear that the United States does not want to provide more market access for Asian countries.
  • The "Indo-Pacific Strategy" divides countries into four categories according to their bilateral relations and importance. This "stratified approach" hinders the original framework and cooperation process of ASEAN, forcing member countries to "choose one or the other". At the same time, the US chooses allies from the stronger countries within ASEAN, and lacks interest in countries with lower levels of development, further reinforcing the development gap among member countries.
  • The "Indo-Pacific Strategy" focuses on security, defense, and military cooperation and downplays the economic issues of concern to ASEAN. During 2010-2019, China-ASEAN bilateral trade more than doubled, while that of US-ASEAN increased by only 62.65 percent.
  • The "Indo-Pacific Strategy" is a continuation of US Cold War "diplomacy", politicizing and militarizing disputes, which conflicts with ASEAN's philosophy of opposing politicization and aiming for cooperation.

Summary

Liu Zongyi believes that China's position as the centre of the Asian supply chain has been consolidated, the Regional Comprehensive Economic Partnership (RCEP) has been launched, and the "Indo-Pacific Economic Framework" cannot stop China's continued rise. According to Huang He and Zhang Yuting, from the Obama to the Biden administrations, US diplomatic practices and strategic rules have been limited in helping ASEAN expand its leadership and influence in regional affairs, while China has provided tangible support to the ASEAN integration process and "ASEAN centrality" through practical cooperation.

Russian-Ukrainian war: The EU and Ukraine will be the biggest losers
Chen Wenling
Chen Wenling (陈文玲) is Chief Economist at the China Center for International Economic Exchanges, a think tank under the National Development and Reform Commission

Context

The war between Russia and Ukraine has been going on for three months, during which the conflict has been escalating. According to Chen Wenling, although the battlefield is in Ukraine, the conflict has regional and global impacts, with Ukraine and the EU losing the most.

Key points

  • The US is the initiator of the Russian-Ukrainian conflict and its aim is to "kill four birds with one stone": to use Ukraine as a pawn to provoke the conflict, thus fortifying a US-controlled NATO, to sever ties between Europe and Russia, to speed up the US dollar flowing back into the US, and to provide lucrative contracts for the nearly 4,000 lobbying groups in the US military-industrial complex.
  • In 2020, Russia's proven natural gas reserves of 37.4 trillion cubic metres, which is about 20 percent of global reserves, were exported in large quantities to Europe via pipelines. With the US-instigated Russian-Ukrainian conflict, however, US natural gas companies would be able to usurp the Russians, due to the sanctions, and take over this lucrative European market. In this sense, one of the reasons behind the Russian-Ukrainian conflict is the battle for energy.
  • The US tied its allies together to sanction Russia, causing a major impact on the world economy, especially in Europe. The EU's economic growth rate has fallen sharply, and an energy crisis has emerged. Also, there is a high risk that the euro will be devalued as a result of the war.
  • The US has declared China its biggest strategic competitor and is also ready to aggressively take on Russia and China at the same time. The country has now launched a comprehensive ideological and technological war against China but is not ready for a hot war as the US and Chinese economies are so closely linked. Also, the US has not yet made substantial progress in strengthening its supply chain focusing on four key fields including semiconductors. Taiwan province, as the US's pawn to contain China, can help the US to build semiconductor plants through TSMC, a Taiwanese chipmaking giant. This plan, however, hasn't yet been accomplished.
  • The Russian-Ukrainian conflict may affect China in three aspects. First, as Russia is one of China's largest oil and gas suppliers , the intensification of the conflict may affect China's energy security. Second, the West has imposed unprecedentedly harsh sanctions against Russia, and China's silence may result in US retaliation. Third, China's plan of building the Belt and Road Initiative (一带一路 yī dài yī lù) with Ukraine and EU countries will be affected. However, the overall impact on China's economy will not be significant.

Summary

The author argues that Russia, a major exporter of energy resources and food, along with its developed military industry and control of the Arctic shipping lanes, is able to handle economic stress. Ukraine, by contrast, is mere cannon fodder in order to maintain the US's hegemony. Rather than launching or provoking wars, China promotes peace, development, and multilateralism.

The story of C919 : China’s development of its homegrown airliner
Lu Feng
Lu Feng (路风) is a professor at the Department of Political Economy, School of Government, Peking University.
Zhao Yining
Zhao Yining (赵忆宁) is a journalist and author of the book Megaprojects in a Great Nation

Context

On May 14, China's C919 large jet airliner completed a test flight in Shanghai. Built by the state-owned Commercial Aircraft Corporation of China (COMAC), the C919 rivals Boeing's 737 and Airbus's 320, and thus triggered widespread media attention. As a participant in the project justification, Lu Feng recounts the decision-making process and the twists and turns of China's large aircraft project and emphasizes the importance of the independent development of the project in the face of the US crackdown on the country's technology sector.

Key points

  • In 1970, Shanghai started the development of China's first large passenger aircraft, the Y-10, on instructions from Mao Zedong. After a decade, the Y-10 was successfully developed and became a technological achievement equivalent to the "Two Bombs and One Satellite". After the project was abandoned in 1985, the R&D platform, supply chain development, and talent training were also discontinued.
  • After the Taiwan Strait Crisis (1995-1996) and the NATO bombing of the Chinese Embassy in Yugoslavia (1999), Chinese leaders began to invest more in the national defense industry, and the large aircraft project was revitalized in 2003.
  • The justification process for the large aircraft project was arduous. As China's technical capabilities were less developed than those of the United States and Europe, Lu suggested learning from the experience of China's first aircraft carrier, Liaoning, which was developed using an old Ukrainian aircraft that China had been purchased and allowing the original technical staff of Y-10 to resume flight. But the suggestion was not approved.
  • There were also disputes between different government departments on whether to build a military transport plane or a civilian passenger plane. After two rounds of discussion, the government decided to build the two projects simultaneously. In 2007, China launched the C919 project in Shanghai and the military transport plane project in Shaanxi.
  • When the project was resumed, they had to start from scratch due to the lack of a relevant supply chain and the necessary talent. The initial budget of the C919 was 60-70 billion yuan, far exceeding the cost of the Y-10 (537.7 million yuan).
  • It is correct for COMAC to choose the independent path for R&D, but China should learn from the lessons of the Y-10 and be more patient with setbacks. China's strategic goal is not only to make products, but to establish a sustained R&D platform and realize advanced industrialization.

Summary

Lu Feng points out that the completion of the C919 and its successful maiden flight will certainly affect international vested interests. China should not underestimate the determination of European and US politicians and businesses to throttle China's civil aviation industry. Even if Europe and the United States do not give the C919 the certificate of airworthiness, China should continue in its development of the industry. If the aircraft is not allowed to fly international routes, then it can still fly domestic routes. China's market is large enough to support its civil aircraft industry.

How China’s socialist transformation (1953-1956) innovated Marxism
He Ganqiang
He Ganqiang (何干强) is a professor at Nanjing University of Finance and Economics

Context

From 1953 to 1956, the Communist Party of China (CPC) carried out a socialist transformation of private ownership of the means of production in agriculture, handicrafts, and capitalist industry and commerce (or "socialist transition"社会主义改造shèhuì zhǔyì gǎizào). This was according to CPC's general line on the transition period, and gradually established a socialist economic system with public ownership as the foundation. According to He Ganqiang, the socialist transformation of capitalist industry and commerce (资本主义工商业的社会主义改造zīběn zhǔyì gōngshāngyè de shèhuì zhǔyì gǎizào) was carried out by CPC through the creative application of the principles of Marxist political economy, which has far-reaching historical and practical significance.

Key points

  • According to Marxist principles, a communist revolution must "eliminate capitalist ownership". Following this principle combined with China's circumstances, CPC divided the bourgeoisie into the bureaucrat-comprador bourgeoisie (官僚买办资产阶级 guānliáo mǎibàn zīchǎn jiējí) who served international imperialism and the national bourgeoisie (民族资产阶级 mínzú zīchǎn jiējí) who supported the socialist revolution. The Party expropriated the assets of the former, while toward the latter adopted the guideline of "using, restriction, and transformation" and the non-confrontational and peaceful approach of "redemption". For example, through the public-private joint management (公私合营 gōngsī héyíng), the transformation of capitalist private ownership into a socialist public economy was gradually achieved.
  • During the process of the transformation, Mao Zedong pointed out that "we now have two alliances: one with the peasants and the other with the national bourgeoisie. Both alliances are important. Both alliances consolidate the alliance of workers and peasants and guide the national capitalists to the path of socialism".
  • The socialist transformation of capitalist industry and commerce promoted the development of socialist industrialization. During the First Five-Year Plan (1953-1957), the total industrial output value of the country increased from 27.01 billion yuan (1952) to 62.82 billion yuan (1957), with an average annual growth rate of 18 percent.
  • After the reform and opening up, privatization in some areas, especially in the public sector, eroded social equity and public interests. Thus, we must be cautious and fully comprehend that a significant increase in the proportion of private ownership (the private sector accounts for around 75 percent of employment) could lead to negative consequences such as widening the income gap.

Summary

The successful completion of the socialist transformation of capitalist industry and commerce in 1956 was attributed to enrichment and innovation by CPC in the Marxist principles of the communist revolution. From 1952 to 1956, the economic composition of China's socialist public sector (including the state-run economy, and the state-owned cooperatives, and the cooperative economy) increased from 21.3 percent to 92.9 percent. Deng Xiaoping once commented that "the triumphant completion of the socialist transformation of capitalist industry and commerce is one of the most glorious victories in the history of socialism in China and the world".

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